Advocates, researchers and a competitive supplier press for fewer riders and longer multiyear rate plans to restore cost containment incentives

A range of stakeholders at the Virginia Performance Based Regulation stakeholder meeting urged the commission and the stakeholder group to examine whether Virginia’s heavy reliance on rate adjustment clauses and frequent filings has weakened cost containment incentives and whether a multiyear rate plan would strengthen utility performance and lower costs for customers.

"The cleanest, cheapest energy is the energy never generated," Lena Lewis, energy and climate policy manager at The Nature Conservancy’s Virginia chapter, said during her presentation on energy efficiency. Lewis and other presenters framed the regulatory incentives question around whether utilities are rewarded for selling more electricity and building capital‑intensive projects rather than for reducing demand or maximizing efficiency.

Clean Virginia’s analysis Laura Gonzalez of Clean Virginia presented an analysis arguing that riders have substantially reduced the regulatory lag that historically incentivized utilities to control costs. Gonzalez cited a slide stating that about "75% of Dominion's 35,500,000,000.0 plant capital expenses are eligible for rider treatment in Virginia compared to 5015% of costs eligible for rider treatment in South Carolina," and she said this scope of tracker eligibility can reduce regulators' ability to use the lag between spending and recovery as a market‑like cost control mechanism.

Academic and benchmarking perspective Mark Lowry of the Pacific Economics Group described the core elements of a multi‑year rate plan (MYP): a rate‑case moratorium (typically three to five years), an attrition relief mechanism to allow revenue to grow between rate cases, limited trackers for truly volatile costs, and targeted performance incentive mechanisms. Lowry summarized productivity research showing utilities that operated under multi‑year plans saw faster productivity growth and cited an Alberta example where removing excessive trackers and imposing a capital budget improved capital productivity.

Competitive supplier and market perspective Travis Kabula of NRG, a competitive service provider, said competitive companies face strong incentives because they can lose customers, and that retailers' financial incentives to reduce costs are therefore stronger than those of regulated utilities that recover costs through riders. Kabula criticized Virginia’s extent of trackers and said, "Virginia is very respected for having 1 of the most talented regulatory institutions ... but it's administering 1 of the worst systems of economic regulation from a performance based regulation point of view." He recommended rolling riders into base rates, implementing a longer rate case moratorium with a predetermined attrition mechanism, and using shared‑savings features for large volatile expenses if needed.

Regulatory safeguards and prudency reviews Presenters emphasized that if regulatory lag is lengthened through MYPs, regulators must strengthen planning, prudency reviews, transparent competitive procurement processes, and staff resources. Clean Virginia and others recommended more frequent, transparent competitive solicitations and independent evaluation of RFPs.

Ending Stakeholders suggested the SCC explore the tradeoffs—trackers reduce near‑term volatility but can erode cost control incentives; multi‑year plans can restore those incentives but require robust mechanisms for truly volatile costs and stronger regulator resources. The stakeholder process will collect written comments and revisit these tradeoffs in the January meetings.